Germany: The shadow side of the rocky reform road

In a recent post and in direct or indirect reply to a post by Michael Burda, I talked about the “rocky road to full employment” — borrowing a phrase from the neo-structuralist Lance Taylor. In short, neo-structuralist thinking in the spirit of Taylor describes economic development as an integrated process with a special focus on […]

Rising number of childbirths in Germany: A glimmer of hope for consumption

Whether a significant pick-up in consumer spending in Germany is in store over the coming year, will be of essential importance for this country’s and Europe’s growth prospects in 2008. As Sebastian Dullien correctly outlined in his post on November 9, 2007  (, the coming twelve months will not see an environment that is conducive […]

The Colombian Economy in the Time of Cholera?

In his well-known novel, recently made into a movie, the celebrated Colombian novelist Gabriel García Márquez argues that the symptoms of love are exasperatingly similar to those of cholera. We feel entitled to extrapolate to recent Andean country events: it seems to us that the symptoms of economic malaise can likewise be exasperatingly cholera-like. This […]

Whither Debt-to-GDP in Brazil

Brazil’s external-account indicators currently locate it among investment grade countries. Nonetheless, despite the fact that its fiscal behavior in terms of primary surpluses and public debt trajectory since the 2002 confidence crisis has surprised many skeptical analysts along the way, Brazil’s public debt-to-GDP level is still high as compared to peers. Therefore, the government’s defeat […]

2008: Possible Impacts of a US Slowdown in Brazil

The famous phrase, “there’s no such thing as a free lunch” coined by the no less famous economist Milton Friedman, is probably the most direct and undoubted synthesis of the economic process or theory: today’s lunch comes from yesterday’s sweat and hard work. The current economic situation, Brazilian and worldwide, is the consequence of actions […]

Overview: So Much for Decoupling

After a week of steady declines, the emerging markets are losing faith in the decoupling argument. Industrial commodity prices plunged. Copper prices fell more than 23% in less than 2 months. Aluminum prices dropped more than 20% since August. Oil is down 8% from its highs. Not surprisingly, the decline in commodity prices is weighing […]

Germany’s messy approach to minimum wages

Recent news in Germany has once again brought the ongoing discussion about the introduction of minimum wage to the newspaper headlines. After unions and the federal postal services agreed upon the introduction of a sector-wide agreement which is to be declared mandatory by early-2008, a private sector competitor announced 1,000 in staff layoffs and is […]

Capital Controls in Colombia

When one thinks about capital controls in Latin America, Chile is the country that usually comes up to mind. Colombia has also been a “champion” in these types of distortions. Since 1998 Colombia has had three rounds of bureaucratic creativity on capital controls. From 1998 to 2000 and from May 2007 until today, controls have […]

Inflation in Peru: Read the Small Print

We hear that Peru’s headline inflation number in the first 11 months of 2007 is running at 3.08%. Now this might be a tad over the inflation target set by the country’s central bank (2% plus or minus one percentage point), but what with one thing and another it’s a good effort for 2007 and […]

The hard task of pricing liquidity risk

The credit crisis continues unabated. In order to understand the nature of the crisis, it is useful to think of it as a failure to price liquidity risk correctly; a failure that has an interesting dynamics. During the last five years prior to August 2007, the market systematically underestimated liquidity risk and therefore systematically put […]

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